Twenty Steps for Pricing a Patent

According to J. Timothy Cromley, "in order to value a patent, you have to understand it." Here are the bullet points from his paper entitled "Twenty Steps for Pricing a Patent," from the Journal of Accountancy of the American Institute of Certified Public Accountants:

1. Check whether the patent is in force.
2. Identify the context.
3. Gather information.
4. Assemble a valuation team.
5. Read the patent.
6. Investigate the patent’s scope.
7. Talk with a patent attorney.
8. Inquire about the patent’s validity.
9. Inquire into blocking patents.
10. Consider synergies among patents.
11. Investigate foreign patent protection.
12. Consider the remaining life of the patent.
13. Analyze any prior royalties paid for the patent.
14. Inquire into any actual or threatened litigation involving the patent.
15. 15. Identify the next-best alternative technologies.
16. Estimate a demand curve for the patented item.
17. Determine the patented product’s point of profit maximization.
18. Consider the applicability of traditional valuation approaches.
19. Do an income-approach valuation.
20. Write the patent valuation report.

A brief overview of the financial and tax reporting issues associated with the valuation and treatment of patents is also available here from Grover Rutter CPA/ABV, CVA, BVAL.